What you should know about HMOs and tax
The usual rules, regulations, and legislation must be adhered to by landlords when letting out an HMO, just as they must with a standard property. Large HMOs may be required to meet additional standards.
An HMO is a house of multiple occupation. This applies if at least three tenants live in the house and form more than one household, and the toilet, bathroom, or kitchen facilities are shared with other tenants.
In terms of dealing with income and corporation tax, there are several considerations that landlords of HMOs must take into account.
Tax
Any spending required to refit, restructure, or renovate an HMO is generally regarded as a revenue cost. This means these costs are tax deductible.
The costs of carrying out simple repairs can also be regarded as a revenue cost for tax purposes; however, anything beyond a simple repair or a like-for-like exchange can be considered capital expenditure.
The area between repairs and improvements can be a grey one in terms of allowable tax deductions, so landlords should bear this in mind and seek professional advice if they need clarification.
If HMRC considers that the rooms do not provide adequate provision for the facilities required for private day-to-day living, it will not offer tax relief on shared facilities such as kitchens or bathrooms; however, plumbing and electrical systems in common areas such as corridors may still be claimable.
Can student accommodation be an HMO?
Yes, one of the most commonplace HMO residence types is student accommodation. There are many professionally managed student properties Exeter and the surrounding areas available. The student properties Exeter are often a good example of multiple households sharing a building, usually under the format of separate bedroom areas with shared bathing and cooking facilities.
Student accommodation typically includes utility bills in the cost of the weekly or monthly rent; therefore, utilities such as broadband, council tax, and energy are included in the cost. A landlord will be responsible for ensuring these costs are recorded separately and identified clearly on their investor tax returns.
